Krugman the Saucy Vixen Playing Hard to Get With Scott Sumner
Poor Scott Sumner. Little does he know, I will soon write a Mises Daily article that absolutely eviscerates his “interest-income-isn’t-really-income” posts. But then on top of that, Krugman gives him the cold shoulder today:
The truth is that it’s very hard for central banks to get traction in a zero-rate world. This doesn’t mean that they shouldn’t try. But nobody is sure how much effect quantitative easing will have on long-term rates; even a decade ago, I thought Ben Bernanke was too optimistic on that front, which is why I was more of an advocate of inflation targeting — yet I was also aware that making inflation targets credible is itself tricky. Furthermore, even if long rates can be reduced, how much effect will they have? Business investment is relatively insensitive to interest rates, mainly because equipment doesn’t have all that long a lifetime. Housing is the place where the rubber usually meets the road; but not in the aftermath of a huge bubble and vast overbuilding.
So I didn’t and don’t think that we can count on monetary policy to do the job; blithely declaring that the Fed should target nominal GDP misses the difficulties. And that means we need fiscal policy.
This is really getting out of hand. I know a lot of you folks have real jobs and you don’t keep tabs on Krugman’s latest stance vis-a-vis fiscal versus monetary stimulus, but that’s why you have me. I am not going to look it up, but trust me, Krugman has flip-flopped several times on this. Back when Obama first came in, Krugman was gung-ho about the need for big deficit spending.
Then, he gradually morphed over time until he sounded just like Scott Sumner. In fact–and here I’m not even kidding–I actually sent Scott an email saying something like, “Scott, I still think you’re nuts, but you actually managed to change Krugman’s mind. That’s impressive.”
And now, just like that, Krugman repudiates the Sumner Doctrine. And he doesn’t even have the courtesy to mention Scott by name. Nobel laureates have to keep up appearances, you know.
So I was wondering what could have prompted such a turnaround. Then I recalled a recent Sumner post that the ineluctable von Pepe sent me just yesterday, in which Scott opened like this:
Paul Krugman and Joe Stiglitz are brilliant Nobel-prize winning economists. Both have been known to be somewhat caustic in their criticism of others. Most importantly, both are public intellectuals who often criticize the orthodox establishment from a liberal or progressive vantage point. I used to think they were sort of similar.
Until now. In the field of macro, Krugman >>>>>>>>> Stiglitz.
For those of you who didn’t spend your adolescent years wishing you were an android, let me explain: Scott is saying that Krugman is a much much better macroeconomist than Stiglitz.
So I think we’ve solved the mystery. Scott ramped up the affection just a bit too much, and Krugman got freaked out and needed his space. Or, if you prefer Scott’s symbolic approach:
I know! Scott, you can make Krugman jealous by lavishing praise on some other hot-shot blogger. For example, you could say, “Maybe this Murphy guy has been right all along. Maybe diverting a trillion dollars in resources to investment bankers–the very people whose bad investments got us into this mess–is a bad idea. Maybe, just maybe, central planning is bad when it comes to the printing press too.”
Go ahead and try it, Scott. Krugman will be texting you in no time. “Scott u free 4 dinner 2 talk about M2?”
More on the Tennessee Fire
Stevie sends this:
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The Most Amazing CNBC Article I Have Ever Read
I reproduce John Carney’s article here in full:
David Stockman: I Invest In Anything Bernanke Can’t Destroy
“I invest in anything that Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries,” David Stockman tells Jennifer DePaul of the Fiscal Times.
Stockman rose to fame as a Hayek quoting Congressman who became Ronald Reagan’s budget director. His conversations with journalist William Greider created a firestorm because Stockman was deeply critical of the Reagan administration’s supply-side budget practices. These days he’s working on a book about the financial crisis.
I can’t find anything to argue with in his assessment of our current troubles:
We are not in a conventional business cycle recovery, so stimulus is futile and just adds needlessly to the $9 trillion of Treasury paper already floating dangerously around world financial markets. Instead, after 40 years of profligate accumulation of public and private debt, and reckless money-printing by the Fed, we had an economic crash landing, which left us with an enduring structural breakdown, not just a cyclical downturn.
In effect, we undertook a national leveraged buyout, raising total credit market debt to $52 trillion which represented a 3.6X leverage ratio against national income or GDP. By contrast, during the 110 years prior to 1980, our aggregate leverage hugged closely to a far more modest ratio at 1.5 times national income.
The only solution is a long period of debt deflation, downsizing and economic rehabilitation, including a sustained downshift in consumption and corresponding rise in national savings.
And then Carney links to the full interview.
A Financial Riddle
I was listening to talk radio when a commercial came on saying, “Do you know the 12 warning signs of a crumbling foundation?” (It was an ad for guys to fix your house.) I turned the radio off and chuckled, thinking that fear certainly sells products and services.
This then reminded me of someone who said that fear and greed were the two motivating forces in the stock market. I couldn’t deny the truth of this, even though it was deplorable. After all, greed and fear (as opposed to industry and prudence) are vices, at least for a Christian.
Then, in a moment of whimsy, I asked myself, “OK, what would it look like if investors were guided by love?” I couldn’t even imagine what that would mean, and I was just about to dismiss the question as absurd.
But then I remembered that an instructor had once told me (while taking a class), quite matter-of-factly and without irony, that a certain financial product could only be sold where there was love.
What is that financial product?
Salon’s Misguided Attack on Libertarianism
Wow, this guy Alex Pareene really despises libertarians. Pareene jumped on the case of the fire department letting the house burn down, as an example of Hayekian thought–he even plastered a picture of dear Friedrich at the top of his post.
David R. Henderson does a good job over at EconLog pointing out the absurdity of this ploy. This was a government-run fire department. Furthermore, the behavior of the firefighters doesn’t make sense even from a narrow business perspective.
So how in the heck is this an example of “privatization” or “the free market”? If you wanted to make a comparison to health insurance, the moral would be: Sarah Palin was right, don’t let them get life and death power over you. Look at how heartless these bureaucrats can be.
However, I want to point out some things in Pareene’s article that I haven’t seen mentioned yet:
* In the article that Pareene quotes, the following sentence is its own paragraph: “The mayor said if homeowners don’t pay, they’re out of luck.” Now shouldn’t that have set off an alarm somewhere, that this wasn’t a private operation? When there are news articles on, say, the “outrageous” practice of airlines charging fees for checked baggage, do the reporters go quote the mayor of Atlanta for his reaction? And then he says, “Hey, if fliers don’t pay to have their luggage checked, they’re out of luck. Hope they have extra undies tucked in their pocket.” ?
* After setting up the story, Pareene needs to find a libertarian defending the fire department, right? I mean, that would be crucial in his case. Unfortunately, he can’t find one. So here’s the next best thing:
Daniel Foster, The Corner’s resident hip libertarian-leaning conservative, is rightly appalled by this entire story. He has no problem with opt-in government, of course! It’s just that he has this crazy notion that the firefighters had a moral responsibility to stop a man’s house from burning down, especially after they responded to his neighbor. And, come on, the guy offered to pay! So no moral hazard!
OK, everyone keeping up? In order to prove how stupid libertarians are for supporting this ridiculous program implemented by a city government, Pareene quotes National Review’s “resident hip libertarian-leaning conservative.” So not even an actual libertarian, mind you, just a libertarian-leaning conservative. And…this libertarian-leaning conservative is APPALLED by the story.
* Hmm, this is quite a corner into which Pareene has painted himself. How is he going to turn a libertarian-leaning conservative, who is appalled by a city government’s policy, into a libertarian praising the free market?
Simple: Pareene will quote someone who comments on the blog:
A-ha, a reader responds. He “offered.” But he is clearly a deadbeat, and a leech on society, and the firefighters were right to watch as everything he owned became ash.
UPDATE: A reader writes:
Yes, he offered to pay, while his house burned. I can’t prove what would have happened, but the FD would probably have had to sue him to gain full reimbursement. Maybe they need to start carrying pre-printed contracts for the homeowners to sign quickly and obligate themselves for the full cost plus a little profit.
A man whose house is on fire will say anything to a guy with the means to put the fire out — best not to trust him, unless you can get it in writing.
I sometimes feel bad for smart, principled conservative bloggers, because the only people worse than their peers are their readers.
(I realize the above is a little confusing; it’s Pareene quoting Foster, quoting a commenter on Foster’s post [I think!].)
So there you have it: In order to blow up the extreme radical case for privatization, Pareene puts a picture of the moderate Hayek at the top of his post (who, as far as I know, didn’t call for privatizing the fire department). Then he quotes from a story that clearly says it was the city of South Fulton in charge of this, and even quotes the mayor defending the fire department.
Then, Pareene quotes a conservative writer who was appalled by the whole thing.
Finally, Pareene quotes from an unnamed person who left a comment on the National Review blog, which Foster then incorporated into his post. Pareene doesn’t establish that this commenter is a libertarian, and in fact, I’m not even sure what side the guy is on; he was so sarcastic it’s hard to tell whom he’s mocking, the defenders of the fire department or of the homeowner.
Truly, this is the last nail in the coffin for libertarianism.
No Pressure? No Humor
These are the series of ads about cutting carbon emissions by 10%, that were apparently yanked within a few hours of going public. You can see why. (HT2 Grayson Lilburne)
I don’t mean to be naive here, but what the heck is the point of this? It would be funny–in a sick joke sort of way–if critics of environmentalists made these. But how is it in any way entertaining or humorous for the environmentalists to do so?
To repeat, I’m not merely saying, “I don’t find this funny.” I’m saying, I don’t even understand how the creators could have mistakenly believed it was funny. The only “joke” here is, “Ha ha, we’re telling you it’s up to you whether to cut back or not, but really, that’s a lie. We will kill you if you don’t get in line.”
I toyed with the idea that they’re saying, “The Earth isn’t playing games, it’s not your personal preference here.” But no, people are killed when someone consciously pushes a button, seconds after assuring them that their choice is fine.
What the heck?!
Firefighters Watch House Burn Down
Oh man, the progressives are really going nuts about this one. Apparently there is a fire department that watched a rural Tennessee house burn down, because the residents hadn’t paid the $75 annual subscription fee. (HT2 Krugman) Here is ThinkProgress’s initial reaction, and then see them cast National Review bloggers into hell.
This is a tough one. I am a wimp and agree with both sides. That is, I agree with Jonah Goldberg et al. for saying that hey, it takes real resources to field a fire department and be prepared to put out fires. If people don’t pay the measly $75 annual fee, then what the heck? Actions have consequences, and this will make sure people pay up. (My only personal addition: Krugman & Friends are going on and on about how much more compassionate they are than the heartless conservatives. But of course, the way Krugman & Friends “solve” this problem isn’t to chip in their own money to cover those who refuse to pay fire or health insurance premiums–no, their progressive, compassionate solution is to tell those people, “We are taking the money from you at gunpoint.”)
On the other hand, I also agree with the progressives that this is absurd. At the very least, the fire department should have put out the fire, and then charged the family a penalty rate. This is different from the auto insurance example that the fire chief gave. This isn’t like someone wrecking his car (or getting cancer) and then trying to sign up for insurance. No, the family would have been glad to pay the expenses (not just marginal but also average cost, as depicted in econ textbooks) for the firefighters to put out the fire, instead of standing there and watching it burn.
Last point: If we actually had a free market, with competing fire departments, there’s no way in the world this would have happened. If one company had gotten to the scene, and then watched the house burn down, everybody would have switched to a competitor.
But of course that nuance is going to be lost in this debate. Instead, we will have “conservatives” at National Review defending the “free market,” and progressives calling for compassionate coercion.
Ah, America.
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